Russia Doesn’t Have a Market Economy but an ‘Anti-Crisis’ One, Able to Play Defense but Not to Produce Real Growth, Prokopenko Says

Paul Goble

            Staunton, Dec. 18 – Russia today doesn’t have a market economy but rather an “anti-crisis” one, capable of playing defense but not of generating real growth, Aleksandra Prokopenko says, leaving the country in “a trap” where “the struggle with crises creates an economy in permanent crisis.”

            The Russian economist at the Berlin Center for East European and International Research says that Moscow takes pride in its ability to counter particular crises but doesn’t recognize that precisely those efforts undermine the ability of the economy to grow. Instead, they create the conditions for more crises and low growth (re-russia.net/expertise/0114/).

            That is because, Prokopenko continues, the regime’s anti-crisis approach freezes in place “the factors of ineffectiveness” rather than does anything to overcome them, something that means crises are significantly more frequent than in genuine market economies and growth far lower.

            From 1991 to 2008, she says, Russia made some major strides toward institutionalizing a market economy; but after the shock of the latter year, it has gone through a series of other shocks that have convinced the Kremlin that the only way forward is to engage in crisis management rather than allowing the markets to self-correct.

            The main lessons the Russian authorities have drawn is that they must devote particular attention to building up reserves and reducing spending “with the exception of those things which support political stability or on which Vladimir Putin insists personally,” Prokopenko continues.

            Consequently, Moscow has dealt with the economy much as fire brigades do with fires: seeking to put out the immediate conflagration with little concern as to how what it does in such cases affects the economy going forward. As a result, crises have become more frequent than in market economies; and the growth rate lower.

            A clear example of this is what has been going on since the beginning of Moscow’s war in Ukraine and the imposition by the West of sanctions. The Kremlin has been able to counter the sanctions and thus counts its policies as successes. But its policies “have deprived the economy of stimuli for development and are provoking new crises.”